Background on Free Trade

International Trade Buzzwords

NAFTA: refers to the North American Free Trade Agreement, which in 1994 established a free-trade zone between the US, Canada, and Mexico. NAFTA passed with some important compromises to protect the environment and labor standards. In 2001, President Bush formalized the proposal of expanding NAFTA to a Free Trade Area for the Americas (FTAA), encompassing 34 countries and 800 million people by 2005. Pres. Obama continues to push for expansion to CAFTA (Central American Free Trade Agreement)

WTO: refers to the World Trade Organization, an international organization intended to reduce trade barriers, formed in 1995. WTO members (which include China since 2001) charge minimal import tariffs on each other. The WTO adjudicates international disputes over trade barriers, such as currency manipulation.

Currency Manipulation: The Republican primary contenders, especially Mitt Romney, accuse China of manipulating their currency. That means they maintain an artifically low exchange rate which makes Chinese goods relatively inexpensive for export. The result is that the US imports more goods from China, at lower cost for US consumers, but the manufacturing jobs are in China.

TPP: The Trans-Pacific Partnership is a proposed free trade agreement between the U.S. and
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
Negotiations began in 2005; China, Mexico, and South Korea may also join.
The TPP is potentially the largest free trade agreement in the world, laying the framework for a "free trade area of the Pacific."
Negotiations have been mostly held in secret, a source of some controversy.
Other controversial topics include trade barriers and currency manipulation (by the Asian nations) and labor and environmental issues (by China).

FTAA: The “free trade area of the Americas” is an extension of NAFTA to include the entire North American continent; negotiations began in 2001. It was scheduled to take effect by 2005, but has been met by strong anti-corporate protests.

Fast-Track: means authorizing the President to sign trade deals with a single yes-or-no Congressional vote after only limited debate.
Supporting Fast-Track implies the speaker supports free trade.

Fair Trade: means placing restrictions on imports based on environmental, labor, or other concerns.
Supporting Fair Trade implies the speaker is against free trade.

Trade Deficits: mean that the US imports more than we export to a particular country.
Concern over trade deficits implies supporting trade restrictions against Mexico, Japan, and East Asia, with whom the US has large trade deficits.

China, the world's largest Communist country, will soon become the world's largest economy (estimated to pass the U.S. in 2024). In 2014, China's economy grew at an annual rate of 7.4%, despite the lingering Great Recession (which only slowed China's growth slightly). U.S. trade with China totaled $562 billion in 2013, but with a $319 billion trade deficit. The U.S. has issues with China on currency manipulation, export dumping, and labor conditions within China. Those trade-related issues will dominate U.S.-China relations in the 2016 campaign and afterwards.

The North American Free Trade Agreement of 1994 establishes a free-trade zone between the US, Canada, and Mexico.

A ‘free trade zone’ means that goods can cross the border in either direction without tariffs or taxes of any kind.

Canada is the largest trading partner of the US, accounting for over 25% of both our imports and exports.

Mexico & Japan account for about 15% each; Europe combined for about 20%; and East Asia combined for about 15%.

NAFTA passed with some important compromises to protect the environment and labor standards; these are refered to as ‘Side Agreements.’

In 1994, President Clinton invited Chile to join NAFTA as the next step toward a Free Trade Zone for the Americas.

In 2001, President Bush formalized the proposal of expanding NAFTA to a Free Trade Area for the Americas, encompassing 34 countries and 800 million people by 2005.

GATT & WTO

The World Trade Organization is an international organization intended to reduce trade barriers, formed in 1995.

The General Agreement on Trade and Tariffs is the international treaty which preceded the WTO's formation; it began in 1947.

The ‘Uruguay Round’ was the most recently completed round of GATT negotiations, completed in 1994.

Negotiations to start a new ‘Round’ took place in Seattle in Dec. 1999, but were disrupted by riots.

WTO members (which includes the US and most industrialized countries) grant each other ‘MFN’ or Most Favored Nation status, which means minimal import tariffs.

Globalization

‘Globalization’ refers generally to free trade, open borders, improved communication and transportation, and the commerce implications of the Internet.

Specifically, anti-globalization advocates refer to the negative aspects of free trade on environmental and labor standards.
At issue is that open borders cause corporations to seek out the lowest environmental and labor standards to minimize production costs, thereby pressuring for lower standards globally.

Anti-globalization advocates primarily focus on the secrecy of WTO proceedings, but also criticize other international trade organizations as too favorable to corporate interests.

Anti-globalization protests have been particularly effective since a large protest at a WTO meeting in Seattle in late 1999. The 2001 WTO meeting was held in Qatar (in the Persian Gulf) partially to make protest more difficult b its remoteness.

While the anti-corporate aspect of anti-globalization is primarily a liberal cause, many conservatives join the anti-globalization movement on grounds of protection of national sovereignty.
At issue is that the WTO and international trade agreements override national law, and hence place the US Congress and the US President subordinate to an unelected foreign organization.

‘Anti-Dumping Laws’

Dumping: A country sells goods in the US at costs lower than they are sold in the home country, presumably with the intent of capturing market share.

Countervailing Duties: The US imposes import tariffs -- often 100% or more -- on goods which the government determines have been dumped.

In the last 4 years, the federal government found dumping in 107 cases, mostly steel from Asia but also on European bananas, and imposed countervailing duties.